The Value of GPO Contracts During Financial Challenges for Universities

The so-called enrollment cliff has created significant financial shortfalls for many colleges and universities. For some, it is at a crisis level. A May 2024 headline in Fortune summed up the challenge this way: “Tuition money sees the biggest plunge in 40 years.”

However, tuition declines are just one of the challenges higher education institutions face today. Many are seeing funding cuts resulting in severe budget constraints. Combined with the higher cost of goods and services, there is increased pressure on procurement teams for cost containment and reduction strategies.

Group purchasing organizations play an increased role amid these financial challenges, helping colleges and universities overcome these mounting budget concerns. GPO contract pricing can offer significant relief, generating 10 to 15% savings.

The Benefits of GPO Contracts

Procurement teams can leverage the benefits of cooperative contracts, including:

  • Cost savings: GPO contract pricing includes bulk discounts for suppliers, providing volume discounts from aggregated spending, which colleges or universities could likely not achieve on their own.
  • Streamlined procurement: You can streamline procurement with a GPO contract, meaning you can reduce administrative time spent on RFPs and overhead.
  • Pre-negotiated terms: GPO contracts can comply with pre-established regulations, reducing the risk of non-compliance issues.

These benefits are amplified amid financial challenges.

Stretching Your Budget Dollars

When budgets are tight, every dollar matters.

If you need to spend $100,000 on lab equipment and GPO contract pricing can save you 15%, that reduces spending by $15,000—not including the investment in time and resources to source and negotiate such savings. For colleges and universities with multi-million-dollar procurement budgets, these savings can add up quickly.

Predictable Costs

Another important factor to consider is managing continuing price increases. While we have seen some slowdown in cost increases, inflation continues to be a serious concern.

GPO agreements can provide price stability to insulate you from sticker shock when there is a price increase. Pre-negotiated pricing with established suppliers enables you to budget and forecast more accurately with a GPO contract, meaning you can avoid cost overruns from price hikes.

Some agreements may span multiple years, helping you hold the line on costs throughout the contract period. Others may include additional incentives, such as pricing tiers depending on volume or automatic reductions from any future price decreases.

Focusing on Strategic Initiatives

In higher education, the core mission is to educate students and develop the next generation of leaders. Procurement teams are charged with acquiring the goods and services to help meet these goals.

GPOs help streamline procurement and reduce the time it takes, freeing up procurement teams to focus on strategic initiatives. Rather than spending time on sourcing suppliers, negotiating contracts, and managing the purchasing process for every item, you can spend time on other cost savings measures, such as:

  • Consolidation: Analyzing spending data can identify opportunities for consolidating spending. Consolidated purchasing can create greater volume discounts and also reduce the size of the management team by limiting the number of suppliers.
  • Standardization: By standardizing product selection across departments, you can reduce costs. Working with faculty and staff to identify opportunities to create consistent purchasing and creating preferred providers can cut down on maverick spending and lead to more saving opportunities.
  • Spend analysis: Data analytics can help you uncover trends and patterns that indicate inefficiencies. For example, digging into energy consumption data might reveal opportunities to implement energy-saving measures in buildings.

With a streamlined procurement process, procurement teams have the time required to act more as strategic purchasing consultants than simply as buyers, allowing them to accelerate their efforts to solve financial challenges.

Instead of being seen as an area that spends money, you can take a leadership role by making a significant contribution to your school’s financial well-being.

How E&I Cooperative Services Can Reduce Your Costs

E&I Cooperative Services is a member-owned, non-profit organization that offers competitively solicited cooperative contracts to its members. As the only sourcing cooperative that focuses exclusively on the education sector, E&I leverages the purchasing power of institutions and negotiates best-in-class pricing and terms to help meet the unique needs of higher education and K-12 institutions.

With a team of procurement professionals and category experts, E&I offers more than 200 cooperative agreements for its members. There is no cost or obligation to become a member of E&I. You can review contracts and choose any of them you want without any minimum spending requirement. E&I Cooperative Services also returns any profits annually to its members in the form of patronage rebates based on purchasing volume.

Explore the benefits of becoming a member of E&I Cooperative Services or view available contracts.


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